European Debt Crisis Threatens the Dollar

The global economic situation is becoming more dire every day. Approximately
half of all US banks have significant exposure to the debt crisis in Europe.
Much more dangerous for the US taxpayer is the dollar's status as reserve currency
for the world, and the US Federal Reserve's status as the lender of last resort.
As we've learned in recent disclosures, this has not only benefitted companies
like AIG, the auto industry and various US banks, but multiple foreign central
banks as they have run into trouble. Nothing has been solved, however, by offering
up the productivity of Americans as a sacrificial lamb. Greece is set to be
the first domino to fall in the string of European economies at risk. Rather
than learning from Greece's terrible example of an over-consuming public sector
and drowning private sector, what is more likely from our politicians is an
eventual bailout of European investors.

The US has a relatively small exposure to overwhelmed Greek banks, but much
larger economies in Europe are set to follow and that will have serious implications
for US banks. Greece is technically small enough to bail out. Italy is not.
Germany is not. France is not. It is estimated that US banks have over a trillion
dollars tied up in at-risk German and French banks. Because the urge to paper
over the debt with more credit is so strong, the collapse of the Euro is imminent.
Will the Fed be held responsible if the Euro brings the US dollar down with
it?

The most disingenuous aspect of the narrative about the European sovereign
debt crisis is that entire economies will collapse if more resources are not
bilked from productive people around the world. This is untrue. Tough times
are coming for the banks, to be sure, but free people always find a way back
to prosperity if the politicians leave them alone. Communities within Greece
are coming together and forming barter systems because they know the Euro is
becoming unstable. Greeks are learning how to engage in commerce with each
other, without the use of fiat currency controlled by central banks. In other
words, they are rediscovering what money really is, and they are trading with
each other in ways that cannot be controlled, manipulated, squandered, inflated
away and generally ruined by corrupt bankers and the politicians that enable
them. Farmers will still grow food, mechanics will still fix cars, people will
still make things and exchange them with each other. No banker, no politician
can stop that by destroying one medium of exchange. People will find or create
another medium of exchange.

Unfortunately when politicians try to monopolize currency with legal tender
laws, the people find it harder and harder to survive the inflation and taxation
to which they are subjected. Bankers should take their dreaded haircut rather
than making innocent people pay for their mistakes. The losses should be limited
and liquidated, rather than perpetuated and rewarded. This is the only way
we can recover.

Government debt is often considered rock solid because it is backed by a government's
ability to forcibly extract interest payments out of the public. The public
is increasingly unwilling to be bilked to make bankers whole. The riots and
the violence in Greece should tell us something about the sustainability of
this system.

If we continue to bail out banks and bankers so they can continue to lose
money, if we cavalierly put this burden on the taxpayer, it is all too predictable
what will happen here.

Congressman Ron Paul of Texas enjoys a national reputation as the premier
advocate for liberty in politics today. Dr. Paul is the leading spokesman
in Washington for limited constitutional government, low taxes, free markets,
and a return to sound monetary policies based on commodity-backed currency.
He is known among both his colleagues in Congress and his constituents for
his consistent voting record in the House of Representatives: Dr. Paul never
votes for legislation unless the proposed measure is expressly authorized
by the Constitution. In the words of former Treasury Secretary William Simon,
Dr. Paul is the "one exception to the Gang of 535" on Capitol Hill.